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Stretching the School Dollar

On Friday, I'm leaving Fordham to join the See Forever Foundation in D.C., which operates the Maya Angelou Public Charter Schools and an Academy at New Beginnings, D.C.'s secure facility for committed youth. (The Academy was recently profiled on Rock Center.)

Before I go, I'd like to share a few of my takeaways from a year and a half of reporting and opining on the nation's school finance challenges.

1. Policy only takes schools so far

Around the country, reformers have won modest breakthroughs on education policy, especially at the state and local level. Charter schools' access to facilities has improved somewhat, administrators have been given greater spending flexibility, mayors have won control of urban systems and installed reform-minded leadership.

Policy cannot mandate high-quality outcomes.

Policy cannot mandate high-quality outcomes, however. Even with new flexibilities and opportunities, too many schools continue to do the same old, same old. Clearly K-12 education as an industry needs to develop greater leadership capacity in order to use newly-won flexibility to full effect.

As in many states, school districts in Pennsylvania struggle to balance their budgets. A recent survey found that more than 140 Keystone State school districts anticipate insolvency in coming years and eight districts said they were already unable to pay their bills. In the state capital, the Harrisburg schools narrowly avoided having to cancel Kindergarten altogether.

Pennsylvania lacks the financial rules and policies to ensure we have transparency and fiscal accountability in place in our schools.

Did the difficult economy of the last several years cause these budget woes? Are waste or financial mismanagement to blame? While districts like Harrisburg have received less state money than before the economic downturn due to declining enrollment, the underlying answer to how things got so bad is simple but frustrating: We really don’t know.

Pennsylvania, like many other states, lacks the financial rules and policies to ensure transparency and fiscal accountability in its schools. Without that, the public can’t determine why districts face insolvency or ensure that officials are making wisespending decisions on behalf of schools and children.

Yesterday's Wall Street Journal shared the (mostly) happy story that the market for debt issued by charter schools to finance facilities and other purchases is growing. Institutional investors and banks understand charters—and the risks they have to manage—much better than in past years, and that's translating to lower borrowing costs for schools. (Note in the excerpt below that when bond prices go up, the interest rates paid by borrowers go down—there's an inverse relationship there.)

Prices for charter-school bonds have risen this year, according to trading data. Cosmos Foundation Inc., which operates 36 charter-school campuses in Texas, issued $50 million in bonds in 2010, and prices have increased about 12 percent.

IDEA Public Schools, a network of schools that received its charter from the state of Texas in 2000, is gearing up for its biggest bond deal yet. Chief Financial Officer Wyatt Truscheit said IDEA Public is planning a $70 million offering in August.

This is the first chapter in what should turn out to be a long story. Relatively few investment firms and banks are active in lending to charter schools, and not all lenders understand this market. Because of this, charter schools in areas that are not...

Teachers have undoubtedly suffered financially in recent years. The pain has largely been borne by early-career teachers in the form of layoffs, pension cuts, and pay freezes. In the D.C. area, where fiscal pressure is starting to ease, raises are coming back—good, but not great news for young teachers.

The good news is that school boards in Montgomery County, Arlington, and other districts are increasing pay instead of cutting class sizes, despite opposition from parents. The cost in Fairfax County was a one-pupil increase in the student-teacher ratio.

Across-the-board raises help experienced teachers much more than others.

Across-the-board raises help experienced teachers much more than others, however. In absolute dollars, a 4 or 5 percent raise on an $85 or 90 thousand salary dwarfs the equivalent increase a first-year teacher sees on $40K. For districts that are among the nation's front-runners in teacher evaluation and the development of meaningful career paths, across the board raises are a disappointing sop to the status quo.

Guest blogger Rebecca Sibilia is the director of fiscal strategy for StudentsFirst.

School leaders in cities, school districts, and states across the country continue to grapple with revenue shortfalls that often require teacher layoffs. Unfortunately, the impact of these layoffs is exacerbated when schools are required to use Last-In, First-Out (LIFO) policies, which require layoffs to be issued in the order of reverse seniority, because such rules mean more teachers, of all skill levels, will lose their jobs.

While the problems of quality-blind layoffs that force good teachers out of the classroom are obvious, the way these policies exacerbate the disruptive impact of teacher layoffs is also important. LIFO not only hurts students by firing newer teachers regardless of their performance, it also harms students and teachers by requiring that districts lay off a greater numbers of teachers than they would need to let go in a system that was based on performance.

A recent study in Education Next showed that only 16 percent of teachers laid-off under LIFO would also be laid-off in a system that uses performance, rather than seniority, as the deciding factor. Good teachers can be found at every level of experience. When districts...

Rahm Emanuel, in his previous life as the President's Chief of Staff, famously said in 2008, "You never want a serious crisis to go to waste." Rahmbo and his home state of Illinois might want to take that advice as the Land of Lincoln's public pension system unravels at the seams. Rather than place their hopes in a failing system, public workers deserve a fundamental rethink of their retirement options.

Public workers deserve a fundamental rethink of their retirement options.

Gov. Pat Quinn has proposed a major reform, one radical enough to gain the approval of the Wall Street Journal editorial board. This plan simply hammers on workers and retirees, however, without improving portability of benefits or ensuring that young teachers get a fair chance at accruing retirement wealth. Illinois should consider 401k-style defined-contribution plans or cash-balance accounts instead of its legacy pension system for teachers.

Special interests predictably claim reforms cannot and will not save money due to transition costs, a fact noted by the University of Arkansas' Robert Costrell in a policy brief released today by the Laura and John Arnold Foundation. The Teachers' Retirement System of the State of Illinois makes just this claim....

For school administrators and board members lost in the forest of books, reports, and briefs written on “doing more with less,” this outstanding volume provides a compass, map, and sturdy walking stick. Finance guru (and former superintendent of Arlington [MA] Public Schools) Nathan Levenson offers rational, honest, and tangible ways for cash-strapped district leaders to shed budget heft without compromising student learning. Guided by four principles—embrace “crazy” ideas, analyze details to make informed decisions, spend on what works, and align interests—Levenson explains how to manage even the most sacrosanct of education-budget items (all without the need for legislative changes or union approval). For example, district leaders should base funding on academic return on investment (A-ROI) determinations—cutting ineffective programs and beefing up those that see results. Take early investment in reading: In an average-sized elementary school (about 400 students), early reading intervention costs about $2,500 per child (and takes about three years to get struggling students up to grade level). Compare this with special-education referral and placement—which costs an additional $5,000 per year (for mild to moderately disabled students) and likely will last throughout the student’s K-12 career....

After months of the presidential candidates paying minimal attention to education, the interest rates on federal student loans emerged as a hot-button political issue this week. These loans play a crucial role in ensuring meaningful post-secondary opportunities for American students, both at Career and Technical Education (CTE) programs and four-year institutions, which is why it’s disconcerting to see both Barack Obama and Mitt Romney present proposals on this issue that may be good politics but are bad policy.

This week President Obama is heavily promoting his plan to keep the interest rate on one type of student loan in particular—new subsidized federal loans—at 3.4 percent. The rate will revert to 6.8 percent in July if Congress does not extend the temporary rate reduction that was enacted in 2007. Federal loans like these are an important source of financial support for community college students, a group Obama has portrayed as a priority for his administration....

"This plan is aggressive." Those are the words used by School District of Philadelphia Chief Academic Officer Penny Nixon this morning in a press conference announcing a massive reform of K-12 education in the City of Brotherly Love. These changes come not a moment too soon: Philly's schools were facing massive deficits and ranked among the worst of America’s large urban school districts.

The SRC deserves credit for making smart structural changes to the way Philly will operate in the future.

The School Recovery Committee deserves credit for making smart structural changes to the way Philly will operate in the future. Aggressive plans often entail mindless slashing of schools and headcount so that "business as usual" can continue elsewhere. The SRC instead plans to bolster parental choice, prizing the development of "high-performing seats" wherever they can be found over protecting the legacy school district at all costs. According to the Inquirer's Kristen Graham, the district also plans to restructure employee benefits, saving $156 million of the projected $218 million deficit for next fiscal year. A 7 percent reduction in per-pupil payments to charters is counterproductive, however: If the SRC really want high quality seats, it shouldn't cut charter funding....

The U.S. spends more per capita on education than every other country in the OECD except Switzerland. Yet teacher salaries are relatively low, especially for early-career teachers, students underperform their OECD peers on international tests, and college students feel their K-12 education was inadequate preparation for higher ed. The solution to all these problems may just be to pay teachers more money, especially in salary rather than expensive fringe benefits.

Our education system has developed an obsession with remediation.

Our education system has developed an obsession with remediation, both for students and teachers. Youngsters fall behind quickly (or start behind) and start an endless round of pull-out instruction, reading groups, remedial courses, and tutoring early. For educators, districts have now beefed up the payroll with instructional coaches, teacher aides, and other paraprofessionals who bring (costly) support and advice but wield little authority. This addiction to support is unhealthy—every dollar spend on remediation and extraneous personnel could be going to pay front-line teachers more.

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About The Editor

Chris Tessone was a Bernard Lee Schwartz Policy Fellow and the Director of Finance of the Thomas B. Fordham Institute. He has strong interests in governance and education finance, especially teacher compensation and school facilities finance.